The Jewish Ethicist: Speculation

Is it ethical to make money without producing anything?

Q. Some people make a lot of money on speculation. Is it really ethical to
make money without producing anything, just by guessing which way prices
are going to move?

A. Fundamentally, speculating is an economically productive activity. But
there is no question that it does present some ethical challenges.

The economic importance of speculation is that it encourages the efficient
allocation of resources. When speculators hoard a commodity anticipating a
future shortage, the result is that when there is indeed a future shortfall
in supply, adequate stockpiles will exist. In the framework of modern
competitive markets, speculation contributes to effective exploitation of
scarce resources.

Given this obvious economic function, it may seem surprising that sages of
the Talmud looked suspiciously on this phenomenon, and subjected it to
various restrictions. One obvious reason for these restrictions is
economic. While speculation is efficient in competitive markets, if
speculators collude then they may create an artificial shortage. Then
speculation is extremely damaging; instead of alleviating hunger it will
create hunger!

But there is also another, more profound reason for these laws. A very
basic principle of marketplace regulation in Jewish law is that economic
considerations were not in the forefront of the thinking of our sages. Most
often, they put human considerations first. This principle applies to the
restrictions on hoarding, as we can see from the source of the regulations.

The Talmud bases this prohibition in the following passage from the prophet
Amos (8:4-6): "Hear this, you who would swallow the needy and destroy the
downtrodden of the land; who say, When will the month pass so that we may
sell grain, and the Sabbatical year so that we may open our granaries?… So that we may buy the poor for money and the needy for a pair of shoes."

We see that the basis of this prohibition is not an economic one. What
interested the Sages was not the economic consequences of hoarding but the
tragic human consequences: the result is that the solidarity of society is
destroyed. The speculators, instead of sharing the general interest in
relief, now have a private interest in continued distress, which will
enrich them. They ask, "When will the month pass?" Rashi explains that they
can't wait for the harvest season to pass, when there will be a shortage of
grain in the market and prices will rise.

Furthermore, these individuals are enticed to go beyond their desire for
monetary enrichment, which is in justifiable within bounds, and to seek
dominance over others: "So that we may buy the poor for money." This is a
tendency which the Torah repeatedly condemns since we are all servants of
God. "For the children of Israel are slaves to Me" (Leviticus
25:42) -- slaves to Him, and not slaves to other human beings.

It is a basic human idea that we should try to ally our economic interests
and our human ones, so as not to be led by our desire for gain into
betraying our ideals. We can illustrate this concept with a simple example:
Imagine a member of a football team just preceding the Super Bowl. If his
team wins, he will earn a huge sum of money; if they lose, the sum will be
far less. Economic theory states that in order to hedge his risks, the
player ought to bet against his own team. But human nature would view such
a course of action as a shocking betrayal of loyalty even if the bet were
small enough that it doesn't create an incentive to throw the match.

Likewise, our sages were concerned that one particular kind of
speculation -- namely betting on disaster -- may sometimes have a negative
effect on the solidarity of our society.

Most kinds of speculation are not regulated by Jewish law and are considered perfectly proper. However, ideally each individual speculator should occasionally examine his investments and make sure that he hasn't created a situation where he is "betting against the home team" and subtly alienating himself from the community.

The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.

The Jewish Ethicist is a joint project of Aish.com and the Business Ethics Center of Jerusalem. To find out more about business ethics and Jewish values for the workplace, visit the JCT Center for Business Ethics website at www.besr.org.

Featured at Aish.com:

About the Author

Rabbi Dr. Asher Meir is Research Director at the Business Ethics Center of Jerusalem (www.besr.org). He studied at Harvard, received a PhD in Economics from MIT, and rabbinic ordination from the Israeli Chief Rabbinate. Prior to moving to Israel, he worked at the Council of Economic Advisers in the Reagan administration. Rabbi Dr. Meir is also a Senior Lecturer in Economics at the Jerusalem College of Technology and has published several articles on business, economics and Jewish law. He is the author of the two-volume, "Meaning in Mitzvot (Feldheim), and his Aish.com columns form the basis of the "Jewish Ethicist" book (ktav.com).

The opinions expressed in the comment section are the personal views of the commenters. Comments are moderated, so please keep it civil.

Visitor Comments: 1

(1)
Yisroel Pensack,
May 11, 2003 12:00 AM

Land speculation is destructive

None of Rabbi Meir's economic arguments in defense of speculation are applicable, however, with regard to land speculation, which is the underlying cause of low wages, unemployment, recessions and depressions.

For a detailed analysis of this subject, read "Progress and Poverty" by the American economist and social philosopher Henry George.

This point -- the condemnation of land speculation -- is proven by the scriptural verses cited in Rabbi Meir's article itself.

When Amos refers to those who say: "So that we may buy the poor for money and the needy for a pair of shoes," he is referring to corrupt land grabbers, as explained by Rashi and Kimchi on a similar passage in Amos II, 6, which says: "...they sell the righteous for money, and the needy for a pair of shoes." Rashi quotes the Targum: "In order to be their heirs" and explains: They pervert the cause of the needy, who is thereby forced to sell his field. If this happens to adjoin the estate of the judge, he is able to buy it cheaply and so can "lock up" (similar root to the word for shoes) his estate in a continuous whole. Kimchi suggests: They force the needy to sell his land, the transaction being confirmed by the ceremony of the shoe (cf. Ruth IV, 7). [Source: The Soncino Chumash, p. 248]

The failure of contemporary Judaism to condemn land speculation is not only immoral, but entirely unbiblical.

Sincerely,

Yisroel Pensack
San Francisco

Submit Your Comment:

Name:*

Display my name?

YesNo

Email:*

Your email address is kept private. Our editor needs it in case we have a question about your comment.

I've been striving to get more into spirituality. But it seems that every time I make some progress, I find myself slipping right back to where I started. I'm getting discouraged and feel like a failure. Can you help?

The Aish Rabbi Replies:

Spiritual slumps are a natural part of spiritual growth. There is a cycle that people go through when at times they feel closer to God and at times more distant. In the words of the Kabbalists, it is "two steps forward and one step back." So although you feel you are slipping, know that this is a natural process. The main thing is to look at your overall progress (over months or years) and be able to see how far you've come!

This is actually God's ingenious way of motivating us further. The sages compare this to teaching a baby how to walk. When the parent is holding on, the baby shrieks with delight and is under the illusion that he knows how to walk. Yet suddenly, when the parent lets go, the child panics, wobbles and may even fall.

At such times when we feel spiritually "down," that is often because God is letting go, giving us the great gift of independence. In some ways, these are the times when we can actually grow the most. For if we can move ourselves just a little bit forward, we truly acquire a level of sanctity that is ours forever.

Here is a practical tool to help pull you out of the doldrums. The Sefer HaChinuch speaks about a great principle in spiritual growth: "The external awakens the internal." This means that although we may not experience immediate feelings of closeness to God, eventually, by continuing to conduct ourselves in such a manner, this physical behavior will have an impact on our spiritual selves and will help us succeed. (A similar idea is discussed by psychologists who say: "Smile and you will feel happy.")

That is the power of Torah commandments. Even if we may not feel like giving charity or praying at this particular moment, by having a "mitzvah" obligation to do so, we are in a framework to become inspired. At that point we can infuse that act of charity or prayer with all the meaning and lift it can provide. But if we'd wait until being inspired, we might be waiting a very long time.

May the Almighty bless you with the clarity to see your progress, and may you do so with joy.

In 1940, a boatload 1,600 Jewish immigrants fleeing Hitler's ovens was denied entry into the port of Haifa; the British deported them to the island of Mauritius. At the time, the British had acceded to Arab demands and restricted Jewish immigration into Palestine. The urgent plight of European Jewry generated an "illegal" immigration movement, but the British were vigilant in denying entry. Some ships, such as the Struma, sunk and their hundreds of passengers killed.

If you seize too much, you are left with nothing. If you take less, you may retain it (Rosh Hashanah 4b).

Sometimes our appetites are insatiable; more accurately, we act as though they were insatiable. The Midrash states that a person may never be satisfied. "If he has one hundred, he wants two hundred. If he gets two hundred, he wants four hundred" (Koheles Rabbah 1:34). How often have we seen people whose insatiable desire for material wealth resulted in their losing everything, much like the gambler whose constant urge to win results in total loss.

People's bodies are finite, and their actual needs are limited. The endless pursuit for more wealth than they can use is nothing more than an elusive belief that they can live forever (Psalms 49:10).

The one part of us which is indeed infinite is our neshamah (soul), which, being of Divine origin, can crave and achieve infinity and eternity, and such craving is characteristic of spiritual growth.

How strange that we tend to give the body much more than it can possibly handle, and the neshamah so much less than it needs!